Can the U.S. Tax Code Be Simplified?

Summary

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The Dispatch Podcast

Episode: Can the U.S. Tax Code Be Simplified?
Date: April 17, 2026
Host: Steve Hayes
Guests: Scott Lincicome (Cato Institute, Dispatch Markets), Megan McArdle (Washington Post, Dispatch Markets), Mike Warren (Dispatch Senior Editor)

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Overview

This episode dives deep into the complexity of the U.S. tax code, the challenges of tax reform, political barriers to simplification, and the growing use of the tax code for both social engineering and political gain. The discussion spans everything from the massive time and resource costs of compliance to the new luxury property tax in New York City, with memorable commentary, some humor, and sharp political analysis. The hosts also touch on the vanishing political appetite for meaningful tax reform and how the rise of populism and leftward energy is reshaping tax debates.

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Key Discussion Points

1. The Overwhelming Complexity of the U.S. Tax Code

• Tax Code Growth and Administrative Burdens

  • Scott Lincicome describes how the tax code continuously expands ("keeps getting more and more complex") due to Congress’s tendency to distribute credits, deductions, and penalties through the code for political reasons.
  • "I suspect a great many Americans cannot know whether or not their tax returns are accurate." — Quoting Donald Rumsfeld’s annual letter to the IRS (03:32)
  • Americans spend $536 billion and 7.1 billion hours annually on tax compliance, the equivalent of “3.4 million full-time American workers…doing nothing but tax paperwork for a full year.” (05:56)

• Unseen Costs and Opportunity Losses

  • Scott emphasizes the "unseen" time and opportunity costs beyond just the financial costs. (07:34)
  • Example: Waiting in gas lines for perceived savings ("Fake joy you can't put a dollar amount on") — humorous banter tying everyday annoyances to economic concepts. (08:51)

Notable Quote

• "That’s only the budgetary cost, right. So I think it’s always important when you’re talking to normal folks...to explain that is only the tip of the iceberg." — Scott Lincicome (07:35)

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2. Why Tax Reform is So Difficult

• A Political Morass
  • Even sweeping reforms like the 2017 Tax Cuts and Jobs Act (TCJA) didn’t fundamentally reduce complexity: "Ultimately we’re still having this conversation." — Mike Warren (11:13)
  • Congress struggles to reform because every deduction or credit has a defending interest group. Plus, the tax preparation industry benefits from complexity. (12:11)
  • The 1986 Tax Act’s "piranha-like contest" forced reforms by tackling everything at once—a rare method that has not been repeated successfully. (12:14, Megan McArdle)

Notable Quote

• "It really will take another 1986 flamethrower approach to do this." — Scott Lincicome (14:57)

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3. Examples of Political and Policy Distortions

• SALT (State and Local Tax Deduction) Drama

  • Explained as a benefit skewed toward wealthy, blue-state taxpayers and a case study of how hard it is to cut privileges:
    • "People in blue states...freaked out about this and have been fighting for years to get that salt cap raised or eliminated..." (13:36)
  • Even when changes are made, pressure mounts to restore deductions, with politicians on both sides defending local interests.

• New Handouts and “Political Catnip”

  • The continual layering of new credits and carve-outs, such as "no tax on tips, no tax on overtime...no tax on auto loan interest, but only if it’s an American made car" (15:22), are irresistible to lawmakers.

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4. Corporate Tax Complexity and Inefficiency

• Why the Corporate Income Tax is a Disaster
  • Megan McArdle: Corporate income is much harder to define than personal income due to vast differences in expenses and profit margins. (16:49)
  • The code encourages economically wasteful behaviors and "structuring" only to minimize tax—citing biofuel credits and depreciation arguments as examples. (23:02)

Notable Quote

• "The loopholes are all the result of 90 years of arguing about what income is." — Megan McArdle (20:16)

• "Corporations do not have hopes and dreams or consumption. Ultimately it’s all about some shareholder...just eliminate the middleman, tax the people." — Megan McArdle (26:37)

• Distortions to National Goals

  • U.S. tax policy can even work against national industrial priorities (e.g., discouraging factory investments while subsidizing others like ethanol). (26:46)
  • The most sophisticated professionals are hired to find every way out of corporate taxation, leading to further inefficiency and loss of revenue. (27:45)

• The International Dimension

  • Megan: Multinationals move profits to low-tax jurisdictions; rather than fight it, her radical suggestion is to cut U.S. corporate tax to lure profits here. (28:51)

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5. The Decline of Tax Reform as a Political Issue

• Historical Contrast
  • Past decades featured high-profile debates (Steve Forbes's flat tax, Herman Cain's 9-9-9 plan), but current cycles lack substantive discussion even as the code grows ever more convoluted. (34:42)
  • Today’s politics are driven less by policy and more by personalities and short-term showmanship (Trump's “who can I help, or punish?” approach). (36:16)
  • Candidates are often startled by in-depth policy questions on the trail. (38:20)

Notable Quote

• "It’s a baffling question for me...it seems like there’s none of the institutional knowledge or interest in debating some of these issues." — Mike Warren (37:18)

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6. New York’s "Pied-à-Terre Tax" on Luxury Real Estate

[Segment: 41:33–53:28]

• Progressive Taxing as Politics and Policy
  • New York City’s new annual tax on high-value, unoccupied luxury apartments targets "the richest of the rich." (41:33)
  • Megan McArdle: This might reduce property values and ultimately lower overall tax collections. (43:15)
  • Wealthy owners use fewer city resources, and their exodus could harm city revenue—"these people are just gonna be like, you know what? I don’t need the hassle. New York's a great place..." (46:55)
  • Analogies to past debacles: New York's manufacturing exodus in the 1960s and near-bankruptcy in the 1970s, when leaders mistakenly thought their tax base was immobile. (51:12)
  • The current anchor of New York’s economy is finance, "overwhelmingly" concentrated — if it leaves, the city faces a crisis.

Notable Quote

• "New York has to really grapple with the fact that there is competition." — Megan McArdle (48:55)

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7. The New Left, Populist Energy, and Policy Innovation

• Mamdani as Populist Progressive

  • Mayor Zoran Mamdani's approach is described as both politically adept and likely disastrous for the city’s economy. (53:28)
  • "He comes up with policy proposals that I think are mostly disastrous...but he's growing his presence." — Steve Hayes (53:35)

• "Policy Vacuum" on the Right

  • Mike Warren points out the absence of serious or competing policy frameworks from the right, suggesting the left/liberal wing is filling the vacuum with new, if flawed, ideas. (55:07)

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Notable Quotes and Memorable Moments

• Donald Rumsfeld Letter about Tax Complexity (03:32):

  • "I have absolutely no idea whether our tax returns and our tax payments are accurate...I cannot and do not know...a great many Americans cannot know whether or not their tax returns are accurate."

• Scott Lincicome on Political Realities of the Tax Code (14:57):

  • "It really will take another 1986 flamethrower approach to do this."

• Megan McArdle on Corporate Taxation (26:37):

  • "Corporations do not have hopes and dreams or consumption. Ultimately it’s all about some shareholder, some manager...just eliminate the middleman, tax the people."

• Mike Warren on Politics (37:18):

  • "...there's none of the institutional knowledge or interest in debating some of these issues..."

• Humorous Moment (08:51):

  • "Steve likes to wait in gas lines at Costco for the perceived savings. The perceived savings bring me so much joy..." — Steve Hayes & Scott Lincicome

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Important Timestamps & Segments

• [01:05] — Launch announcement: Dispatch Markets vertical
• [03:32] — Donald Rumsfeld’s IRS letter on tax complexity
• [04:40] — Why the tax code grows more complex every year
• [05:56] — The immense cost of tax compliance computed in hours, GDP, and comparison to the IRS’s budget
• [10:40] — Why the 2017 Tax Cuts and Jobs Act failed to simplify
• [12:14] — The “genius” of the 1986 Tax Act and political obstacles to reform
• [16:49] — Megan McArdle’s argument against the corporate income tax
• [23:02] — How the tax code channels resources into inefficiency and loophole hunting
• [28:51] — International corporate tax arbitrage—should the U.S. just lower taxes to win?
• [34:42] — Historical context: flat tax debates, Steve Forbes, and why we no longer have those campaigns
• [41:33] — New York City's luxury real estate tax and its likely impacts
• [48:55] — The limits of New York’s competitiveness and economic base
• [55:07] — Political asymmetry: rise of left policy innovation vs. right flank inertia
• [61:46] — "Not Worth Your Time": Discussion on J.D. Vance’s poorly-attended youth rally, implications for GOP enthusiasm

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Podcast Tone & Dynamics

• Conversational, sharp yet accessible, with inside jokes and a friendly, sometimes self-deprecating energy.
• Consistent drawing of connections between big policy concepts and the everyday lives of listeners.
• Emphasis on making complex issues understandable using humor, personal anecdotes, and real-world analogies.

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Conclusion

This episode offers a comprehensive critique of how political incentives perpetuate and compound tax code complexity in the United States. It illustrates why meaningful simplification is so rare, highlights how the tax system distorts both corporate behavior and policy priorities, and explores the consequences of using taxation for social and economic engineering. The discussion of New York's new luxury property tax reveals the limits and risks of populist tax policy, while reflection on the politics of tax reform suggests America may be at a crossroads—stuck in inertia as new, bolder proposals emerge mostly from the left. The episode closes with both sobering and humorous takes on the state of tax policy debate and enthusiasm in American political culture.

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Transcript

[Megan McCardle]

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[Mike Warren]

Ryan Reynolds here from Mint Mobile with a message for everyone paying Big wireless way too much. Please, for the love of everything good in this world, stop with Mint. You can get premium wireless for just $15 a month.

[Megan McCardle]

Of course, if you enjoy overpaying. No judgments. But that's weird.

[Mike Warren]

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[Megan McCardle]

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[Steve Hayes]

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[Megan McCardle]

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[Steve Hayes]

Welcome to the Dispatch Podcast. I'm Steve Hayes and I want to start today with some very exciting news. We at the Dispatch are very pleased to announce the launch of Dispatch Markets in partnership with the U.S. chamber of Commerce. This project will explore U.S. capitalism and economic policy at a time when free enterprise is no longer the assumption and the backdrop. It's increasingly the argument front and center, and often under attack from both the progressive left and the populist right. Expect topics to range from how the Trump administration's tariffs are rippling through the economy to the challenges facing the Federal Reserve System, from AI and the future of work to tax policy. The authors will bring the intellectual honesty, respect for economic realities and a willingness to grapple with trade offs that we hope have become a hallmark of the Dispatch. The roster is impressive and we're very excited about it. Contributors will include Scott Lincecum, vice president of economics at the Cato Institute, lecturer at Duke University Law School, and author of the Capitalism newsletter here at the Dispatch since 2020. Megan McCardell, a Dispatch contributor and Washington Post columnist, host of the Reasonably Optimistic podcast and author of the Upside of Down Carl Smith, a senior fellow at the center for Strategic and International Studies and former Bloomberg columnist longtime vice president at the Tax Foundation Kyla Scanlon, author of a widely read substack and in this Economy, as well as a Vanderbilt Policy Accelerator fellow and New York Times contributor Marian Tupy, founder of HumanProgress.org, co author of Superabundance and a senior fellow at the Cato Institute. And today I'm joined by two authors of Dispatch Markets, Scott Lincecum and Megan McCardle, as well as by Dispatch senior editor Mike Warren. We'll discuss Scott's just published newsletter on her overly complicated tax code and the political right fight over how to reform it. We'll also discuss New York City Mayor Zoran Mamdani's proposed tax on second homes within the city worth $5 million or more. And finally, for Not Worth youh Time, a small crowd for Vice President J.D. vance. Let's dive. Foreign hey everybody, thanks for joining. I want to start with a letter that Donald Rumsfeld used to send to the IRS every tax day. The former defense secretary wrote, I have sent in our federal income tax and our gift tax returns for fill in the year as in prior years. It's important for you to know that I have absolutely no idea whether our tax returns and our tax payments are accurate. Rumsfeld goes on, the tax code is so complex and the forms are so complicated that I know I cannot have any confidence that I know what's being requested and therefore I cannot and do not know. And I suspect a great many Americans cannot know whether or not their tax returns are accurate. Scott, you have a terrific newsletter out Friday, the inaugural issue of the Dispatch Markets Vertical, and you went very deep on tax complexity and reminded me actually of the Donald Rumsfeld letter. What's the problem here?

[Scott Lincecum]

Well, the problem on its face is just simply that the tax code keeps getting more and more complex. And that forces all of us, including me and probably a lot of other people listening to spend countless springtime weekends toiling away in our home offices trying to find receipts and PDFs and things that were mailed to us by random universities that had you out to speak and so on and so on to simply send the government another check. A very frustrating process. So that's on its face is just it keeps getting more complicated. But buried beneath that is the reality that Congress loves handing out goodies or punishing folks via the tax code. And there has been an explosion in what are called tax expenditures. This is just ways to give this person a credit or that energy supply a credit and on and on deductions and on. And the taxes are the easiest way to do that for lots of boring political reasons that maybe Mike can get get into. And thus almost every year now, every other year, surely there's another tax thing that's added to the code and it just keeps getting longer and longer.

[Steve Hayes]

So you have some examples of just how long the code is and just how much time people spend on it. I'm just going to read a little bit from Your piece talking about how much Americans spend on their taxes. 536 billion in 2024, 2025, 1.7% of 2025 gross domestic product. These are numbers according to our friends at the Tax Foundation. And Scott, you write to put these figures in context, 536 billion is more than the corporate income tax will generate this year, around twice as much as Trump's tariffs will raise and more than 43 times the IRS budget. The 7.1 billion hours spent complying meanwhile, is the equivalent to 3.4 million full time American workers, almost the population of Los Angeles, doing nothing but tax paperwork for a full year. Yeah. You know, one of the things that I think we will want to do, and I expect that you will continue to do, you've done this in the past in your Dispatch Markets column, is explain to people the sort of unseen costs of government intervention, government regulation, government tax policy. How do you make that clear? I mean, I think you've done it in a sort of fun and entertaining way there. And goodness knows lots of people are going to be reading Dispatch Markets. But for the couple million people who don't read Dispatch Markets, how do you make that case? How do you frame that up so that people understand that.

[Scott Lincecum]

Yeah, it's hard, Right. Especially because so much of Washington policy discussion is about budgetary cost.

[Steve Hayes]

Right.

[Scott Lincecum]

How much did Washington spend on this? And that's it. Oh, and so when you hear about, you know, Solyndra, for example, a famous green energy boondockle from the Obama years. I'm dating myself, I know, but they say, oh, we lost, we had a $900 million loan or whatever, but that's only the budgetary cost. Right. So I think it's always important when you're talking to normal folks out there. Right. Is to explain that that is only the tip of the iceberg.

[Steve Hayes]

Right.

[Scott Lincecum]

That there will be costs simply in time and energy, handing out that money or lobbying for that money. So there's a cost. And then the other big thing is the opportunity cost. Right. Of the resources that went to build the factory that ended up being empty at Solyndra or plenty of other examples these days around the country are resources that can't go to other things that are more productive.

[Steve Hayes]

Right.

[Scott Lincecum]

That would have been done anyway. And so that's another big cost. So you have to always talk about these other kind of things that are buried in there. You know, taxes are an easy example. You talk about the time cost. I know guys like you, Steve, don't care about time costs, but most of us do.

[Steve Hayes]

That's a shot at me because.

[Scott Lincecum]

Inside joke, because Steve likes to wait in gas lines at Costco.

[Steve Hayes]

I mean, fake.

[Scott Lincecum]

Based on an old column I did,

[Steve Hayes]

I don't like to wait in gas lines at Costco, but I'm willing to wait in gas lines at Costco for the perceived savings. The perceived savings bring me so much joy that you can't put a dollar amount on that. Despite Scott's very entertaining newsletter about this

[Mike Warren]

years ago, Steve, it gives you opportunity to read all of our newsletters while you're waiting for.

[Steve Hayes]

Exactly.

[Megan McCardle]

So there's really no opportunity cost. Right. Also, Steve doesn't sleep, so his time is. Any hour of his time is valuable because he doesn't like the rest of us. Lose a third of them, too.

[Steve Hayes]

I read all of our stuff before it's published, Mike, Just so you know.

[Mike Warren]

Sorry. Well, yeah, yeah, exactly.

[Megan McCardle]

Well, I mean, there's this Washington Post subscription, too, obviously, which I said he's got to get through.

[Scott Lincecum]

But I will say on a slightly more serious note, I think that's the other thing. Right. Trying to. So that piece was on time, costs and use waiting in line at Costco as an example of how much time we spend. That has a real monetary value as well. Right. And there's good economic research on this as well. So that's. I think the other part of this. Right. Is not simply using big numbers and wonky things about, you know, taxes or tariffs or whatever, but talking about, like, our everyday lives. Right. That we deal with all of these things. You know, I wrote many years ago a column on my garden, my home gardening. Right. And that was about how now we have this luxury of being able to waste time in a garden because we actually don't have to grow food ourselves. Right. It's like a fun activity, not a. About actual sustenance. Yeah. You find examples like that and try to convey those complex concepts and ways people actually intuitively understand.

[Mike Warren]

Scott, can I ask something? Because I was reading your newsletter and it just occurred to me as I was filing my tax return, we heard so much in 2017 about the Trump tax cuts, or I think the official name of it was the Tax Cuts and Jobs Act.

[Scott Lincecum]

Yeah.

[Mike Warren]

And this was described as this monumental by proponents and opponents of it, this monumental sort of sweeping tax overhaul. And it did seem that way. I mean, there were, like, major policy changes to the tax code, but yet we're still talking about the complexity in a way that the complexity, which I think people like Paul Ryan, who was the speaker, was seeking to Sort of simplify the tax code. It may be simplified in a relative sense, but ultimately we're still having this conversation. You're still writing about the complexity, it seems like the political will to do what you're talking about, to sort of actually affect that change. I mean, if it couldn't be done in 2017 with Paul Ryan at the helm and Donald Trump read it as sign it, when could it ever be done?

[Scott Lincecum]

Well, exactly. It is a Herculean task because it is not simply one provision, it is hundreds of provisions. And every time you go after one of these provisions, you are going to inevitably arouse the resistance of political constituencies that want that provision or even got created because of that provision.

[Megan McCardle]

Right, yeah.

[Scott Lincecum]

And then there's an entire industry, the tax preparation industry, that benefits financially from all the complexity in the aggregate.

[Megan McCardle]

Right.

[Scott Lincecum]

So it is an extremely difficult nut to crack.

[Megan McCardle]

This was the genius of the 1986 Tax act, was they, as chronicled in the great book Showdown at Gucci Gulch, they wanted to do a base broadening and then getting rid of all of the complexity. And so what they did was they just went after everything at once and they forced. There was just actually limited lobbying bandwidth for everyone in Congress. And so they just forced them into a piranha like contest against each other and actually managed to really do a pretty good job at simplifying the code. And in fact, they tried to run that playbook with Obamacare again. And I think it didn't work quite as well, in part because there were actually fewer special interests, like, still a lot. But it was limited to one sector, whereas with the tax code, you go after everything at once. It was great. We should do that again.

[Scott Lincecum]

Yeah.

[Steve Hayes]

Right.

[Scott Lincecum]

I think the salt tax is just a fantastic example of the difficulties here. Right. So one of the very good things that the TCJ did.

[Steve Hayes]

Wait, tell us what the SALT tax is. Yes, tell us what the TCJ is.

[Scott Lincecum]

So the state and local tax deduction. Right. Is, was and now is again. We'll get to that. A big deal for a lot of taxpayers is particularly ones in high tax blue states, mainly people with very high property taxes and state tax. Well, you could deduct that from your federal income taxes and get a nice break.

[Steve Hayes]

Right.

[Scott Lincecum]

The SALT tax is bad for all sorts of reasons. If you want a progressive tax code, it is actually very. It benefits mainly rich people. If you want more housing, it distorts the housing market. You can go down the list. Right. And of course, it adds to complexity. TCGA lowered the amount of salt deduction you can take to ten grand, which dramatically limited it, especially by raising the standard deduction as well. It really reduced the number of people who were going to itemize their taxes at all. They just take the standard deduction, move on. Right. But of course, people in blue states in high dollar areas, high tax areas freaked out about this and have been fighting for years to get that salt cap raised or eliminated entirely. And they did it in the one big beautiful Bill act, they got raised to $40,000 and it's going to go up again as well. And you had Republicans holding up the entire bill over this one.

[Mike Warren]

Republicans from New York, which is one of the big state where there are a lot of Republican representatives with high tax.

[Scott Lincecum]

Right. Well, their constituents had, you know, $3 million homes in Westchester or whatever, were very upset about not being able to get a tax break. And hey, God bless them, I don't want to pay taxes either. But still, that type of politics is brutal.

[Mike Warren]

Right?

[Scott Lincecum]

And it really will take another 1986 flamethrower approach to do this. It just the bandwidth, especially right now with Republicans, it just doesn't seem like there's much bandwidth because as I wrote in my column, not to give it all away, you know, the one big beautiful Bill act did some decent stuff on extending the TCGA generally, but larded on all sorts of new handouts.

[Steve Hayes]

Right?

[Scott Lincecum]

No tax on tips, no tax on overtime, senior deduction, no tax on auto loan interest, but only if it's an American made car, on and on. And so these things are just irresistible. It's political catnip on the campaign trail. And again, because tax bills now move through reconciliation, you don't have 60 votes in the Senate or whatever. It's just so easy to spend my money, your money, taxpayer money, via the tax code instead of doing the heavy lifting of actual, you know, spending and appropriations.

[Steve Hayes]

And there's not really a process anymore. I mean, all of this stuff, not all of it, but a lot of the stuff is thrown in at the last minute because people don't have time to read the bills. Oh yeah, somebody can sneak provision in, you know, in the last second before colleagues are aware of this. And it gets worse and worse. Megan, you by coincidence, on your very terrific, reasonably optimistic podcast last Friday, thank you. Did a solo pod like Jonah and the Ruminant, only policy focused and less about the dogs and other matters. Did a 20 minute podcast with the headline I'm not anti tax, but this one should go. And you get into the complexity of the corporate tax, corporate income Tax. Is the corporate income tax more complex than personal income tax? And if so, why?

[Megan McCardle]

So the basic problem is this. People get really confused when I argue that we should basically not totally eliminate the corporate income tax. There are some reasons you want to keep a very low one for record keeping purposes to prevent people from claiming that they're a small business, like owns their house and buys their groceries and so forth. But in general, the problem with taxing a corporation is that income is very hard to calculate for a corporation. This is the fundamental issue and the reason it is harder to calculate for a corporation is that their expenses relative to like to needed to generate the income that they get, they vary much more widely than they do for people, right? The basic operating expenses of one human being, they're just not that different between human beings, plus or minus some healthcare. And actually I think one of the reasons we get so emotional about healthcare is that it's the product where the basic amount you need to survive the price of that varies the most widely between people. And as you may have noticed, this is also a very complicated policy area where we're constantly wrangling. So for a corporation, let's take two basic examples. I want to build an aluminum smelter. I need to build, buy a lot of raw material. I need a lot of fixed capital investment. I'm going to need to buy a ton of electricity and turn that or that bauxite as it's called into aluminum. On the other hand, I want to start a consulting business. I need a room and a laptop and a telephone line or you know, an Internet connection and there I'm ready to go. Maybe I get some subscriptions to like information services, right? And the difference. So if for that consulting business, everything I make over my quite low fixed expenses can be profit. Now usually often these business start that that profit is what we would AKA personal income. But for the aluminum smelter or for like a grocery store, profit margins for groceries, after you've accounted for all of their rent and the lighting and the refrigeration and, and then the actual stuff they sell us, their profit margins are generally in the 1 to 3% range. Whereas for a low fixed cost, high productivity business, they can be in the 40, 50, 60, 70% range. And you don't want to tax those things the same because otherwise you're going to end up basically putting all of anything that takes capital and is low margin out of business. And so you have to decide what their actual income is, what their actual profit is, not just how much revenue they took in. And if you don't do that, if you have what's called a gross receipts tax. So for example, the city of Philadelphia used to do this. They had a gross receipts. And you could actually visibly see the effect by driving through the neighborhoods near the border, because you would just. There would be no businesses, no retail, nothing, nothing, nothing, nothing. Cross the street and bam. It's like an explosion. Because you were saving.

[Mike Warren]

It's like liquor stores in New Hampshire where.

[Scott Lincecum]

Yeah, basically you stole my joke.

[Mike Warren]

It's not a joke, it's a reality, Scott.

[Megan McCardle]

But I love driving into New Hampshire from Massachusetts. And just like all of the vape stores, the, like tobacco, the, the liquor stores, because of course they're syntax live

[Scott Lincecum]

free or die, baby.

[Megan McCardle]

Yeah, that's right. So anyway, because of that, you actually just need to figure out, spend a lot of time figuring out what an expense is now, like, look for a lot of things, that's pretty basic. If I pay wages, that's obviously an expense. But okay, what if I tell my employees they can take their clients out to dinner? That's like, maybe I'm generating some sales, maybe I'm not. How do you expense that? Because here is a thing. In the old tax code, before 1986, as we just talked about, the expensing was, let us say, very generous. And so the temptation for employers is to give employees something they don't have to pay taxes on, unlike their salary, which is like a very large expense account and a company car and all of this stuff. So then one of the things the 1986 tax reform did was crack down on all that stuff. I think people who don't spend a lot of time diving into this just think, well, we just got to close the loopholes. No, no, the loopholes are all the result of 90 years of arguing about what income is. Another example is corporate jets. This was Obama's favorite, right? Was like the corporate jet. And what it turned out, if you knew anything about this, you knew how stupid this was. First of all, because this was a tiny, tiny, teeny, tiny amount of revenue. It was like, functionally a rounding error in the budget. But second of all, what you were actually wrangling about was not whether you could expense corporate jets, because some people have to be able to expense jets, like, for example, airline companies. What you were actually arguing about was, should we depreciate them over five years or eight years, Right? And what depreciation is for those not following along at home is just the recognition. Like if you're a cab Driver. And if you're driving for Uber and you're driving your car, you're not just consuming gas, you're actually consuming the car. You're going to have to replace it faster. Right. So depreciation is the little line item in your tax return that says, I used some up some of my car and I'm going to need a new one soon.

[Scott Lincecum]

My home office depreciates every year. I have to calculate.

[Megan McCardle]

Yeah. So anyway, like, we were just arguing about should you take that expense over five years, should you break it up into five chunks or eight chunks when you're deducting it on your taxes? Right. It was the amount of money it cost. The treasury was negligible. But it, like, sounds bad because I am not going to try to go out and explain depreciation to the average voter. And this makes the tax code opaque. It leads to a phenomenal amount of structuring activity where people structure what their corporation does into lower productivity, but also lower tax activities. So this is just economically destructive.

[Steve Hayes]

I thought that was one of the most interesting points that you made on your podcast. Can you go deeper on that for us? Why does that incentivize that behavior?

[Megan McCardle]

Yeah, so the ethanol subsidies are a great example of this. Right. We subsidize ethanol. This is not a good way to use corn at all, but it is a good way to get votes in Iowa, which has the first primary in the nation. And so basically, you've basically gotten agribusinesses and oil companies to do this, like, environmentally not great, economically destructive and inefficient thing. And there's a ton of these things in the tax code, in part because we tend to use the tax code to subsidize stuff because it's somewhat more opaque to voters. It's not costing the treasury any less. But if you structure it as a tax subsidy, it's harder to explain to voters that you were just basically giving these companies money. And so this happens a lot. There was a great one. There was a. Basically they had tried to do a biofuel subsidy in the tax code, and it ended up basically incentivizing companies to create this toxic sludge called black liquor as a side effect of other processes to define that as a biofuel, which it was not, and get a tax break for it. And this stuff is all over the tax code. And it basically, it also does things. So you see this in housing a lot where you get all these subsidies. So, for example, you give tax breaks for certain size developments, but not other Size developments, well, or certain amounts of affordable housing and not others. And you see a lot of cliffs there where you have artificially kind of encouraged people. And again, I'm not necessarily against the government providing housing for people who are not able to be productive in the labor market. But you then like, you should just do that. You should just pay for it. You should not make it into this very, very complicated tax code because it's really inefficient. And the net result of this is that a lot of those stats on how much effort and resources are wasted in the tax code, it's not that none of it is on the personal side, but like a really disproportionate amount is on the corporate side. And so my proposal is this. We get rid of the corporate income tax or we basically drop it down to like 1%, an amount that is not worth evading. We then do away with the special exemption, the special treatment of capital gains, which is another way, right? Like because we have a corporate income tax, we also treat capital gains specially to try to offset the capital destroying aspects of the corporate income tax. Right. So we've now got like two different. All of these, we've already got complexity in the tax code. So just get rid of the special treatment, tax it as ordinary income, tax it once when it hits a person, when a person realizes cash, they pay tax. I also, like, I will now go even further with my incredibly controversial get rid of the estate tax and also treat inheritances as income, which they are. I think you can like arrange, you can allow people to break it up over a certain number of years so that you're not, you know, like, but just treat it as income. It's all income. Because what you actually want to do is tax people. You think you want to tax corporations. Corporations do not have hopes and dreams or consumption. Ultimately it's all about some shareholder, some manager, someone that you think deserves to pay more of the tax bill. Just eliminate the middleman tax the people.

[Scott Lincecum]

Yeah, I'd add two points. I agree with almost everything Megan said there.

[Megan McCardle]

Okay.

[Scott Lincecum]

The. Well, no, on the policy prescription side, we disagree a little. But I think the other things that we need to know about the corporate tax are. One is it creates these massive distortions that run against other apparent national government priorities. You know, for a really long time it was just fixed. In fact, we were taxing corporate tax disproportionately harmed large capital investments. Because you couldn't deduct those investments quickly. You had to amortize them over a long Period. And so it effectively was making it less profitable to build a factory. Yeah, especially a big fancy semiconductor factory. Right. Than it would be to have a software company or something that doesn't have those big, huge upfront investments. So what you were doing basically for a government that was trying to have semiconductor manufacturing. Right. You had a tax code that was literally pushing, you know, literally pushing against that. Right. So there's, and there's all these weird distortions. The other thing though, that I think really important about the corporate tax is corporations hire the most sophisticated professionals to figure out every single way they can minimize their tax liability. So, you know, you and I, we have TurboTax or maybe now Chatbots or maybe you have your accountant buddy down the street. No, like, corporations have like armies of the smartest, most sophisticated, sophisticated tax professionals in the world. And of course they have potential multinational offshore places. They can, they have all of these incredible ways to avoid, or of course to lobby for even more breaks. And so it is just a vehicle for waste and cost and distortion. And I agree entirely. I mean, you know, I, I see the point of having a 1% then be fine, I'm a Nixon altogether guy, but whatever. Right. It's just, it certainly is just terrible. Even now that they've done some simplification, it's still just absolutely terrible.

[Steve Hayes]

Still growing more.

[Megan McCardle]

Yeah, yeah, I should have said too, that like one of the most important ways that companies avoid taxes. Right. Is that you basically, they, they leverage differences in international tax and then you basically structure things so that any activity, most of the profits end up in the country with the lowest tax rate. And now like the Biden administration's idea was we should get a cartel to crack down on that. I think it would be just. Actually, I mean, my proposal is. No, no, no. We should, if you can't beat them, join them. Like, let's just, let's be the country that everyone wants to take all their profits in because our corporate income tax is so low.

[Mike Warren]

Steve, you need to, you need to cut in here because I'm afraid Megan and Scott are going to try to out libertarian each other on this.

[Steve Hayes]

That's okay. That'd be all right with me. I don't want to stop that.

[Mike Warren]

Well, it just, it could get bloody.

[Steve Hayes]

All right, we're going to take a quick break, but we'll be back soon with more from the Dispatch podcast. There's something satisfying about a well made object. Not a gadget that gets replaced every two years, but the kind of thing you could hand down to your kid seems like that's getting a lot harder to find. Today's sponsor is one of the exceptions. Vare, that's V A E R is a Los Angeles watch company whose goal is pretty straightforward. Bring American watchmaking back. And these aren't fashion accessories. They're proper tool watches, sapphire crystals, premium materials and full waterproof warranties, meaning you can actually swim or dive with them on. Let me be honest, I've gone many, many years not really being a watch guy. Decades even. But beginning a few weeks ago, I started wearing a Veyre watch and I love it. It's smart and sophisticated and this is really important to me. Understated. It's the kind of watch that seems designed to last for decades. Go to Vare Watches. That's V a e r watches.com Running a small business isn't easy right now. There's a lot you can't control, but how you run your operations is in your hands. And I found that automating payroll and HR really helps cut down on admins so you can stay focused on growing your business. That's what working with Gusto allows you to do. Gusto is online payroll and benefits software built for small businesses. It's all in one remote, friendly and incredibly easy to use, so you can pay, hire onboard and support your team from anywhere. With automatic tax filing, easy direct deposits, and access to benefits. Gusto takes the stress out of payroll, offering flexible pricing, unlimited runs, and no hidden fees. Try gusto [e-mail] dispatch and get three months free when you run your first payroll. That's three months of free [e-mail] dispatch dispatch one more time gusto.com dispatch have you ever noticed how life proves you wrong? You think certain things will never be you. I'll never settle down. I'll never have kids. I'll never drive a minivan. I'll never be the one worrying about bills or planning ahead. And then one day you are. Life changes and suddenly you have people depending on you. And while it's not easy to think about, planning for the inevitable is part of that. So your loved ones are taken care of. That's where ethos comes in. Ethos makes getting life insurance simple and fully online. Get a quote in seconds, apply in minutes, and potentially get same day coverage with no medical exam, just a few health questions. Online coverage goes up to $3 million with plans starting around $30 a month. Take 10 minutes to get covered today with life insurance through Ethos. Get your free [e-mail] dispatch that's e t h o s.com dispatch application times may vary and rates may vary. And we're back. You're listening to the Dispatch podcast. Let's jump in. I want to circle back to the politics point a little bit here because, you know, I've been in Washington for a long time. I was not here for the 1986 Graham, Rudman, Hollings. All of the tax debates back then, I came a little bit later. But there have been sort of pretty consistently until I would say roughly 10 years ago, eight years ago, six years ago, big debates about tax reform in the country, in Congress, in congressional races, at the presidential level. I mean, if you go back to 1996, remember Steve Forbes, who's this awkward publisher, not a TV friendly guy in a TV friendly moment in American politics, proposed this 17% flat tax and goes from and also ran an asterisk in the polls to add or near the top of polls on the Republican primary side in the days before the Iowa caucuses in the New Hampshire primary. And there was at the time, Forbes had proposed this 17% flat tax. Phil Graham, also running for president, senator from Texas, came up with his own flat tax proposal right before the Iowa caucuses. And it was a 16% across the board flat tax. Which reminded me of the scene from the movie. There's something About Mary when Ben Stiller picks up the hitchhiker and they have this discussion about exercise and marketing.

[Megan McCardle]

I'm gonna start my own company.

[Scott Lincecum]

Really?

[Megan McCardle]

You want in?

[Steve Hayes]

Nah, I'm not. I'm not. I don't really have any, you know, money or.

[Megan McCardle]

You heard of this thing, the eight minute abs.

[Steve Hayes]

Yeah, sure. Eight minute abs. Yeah, the exercise video.

[Megan McCardle]

Well, this is gonna blow that right out of the water. Listen to this. Seven minute abs, right?

[Steve Hayes]

Yes. Okay. All right, I see where you're going.

[Megan McCardle]

Think about it. You walk into a video store, you see 8 minute abs sitting there. There's 7 minute abs right beside it. Which one are you gonna pick?

[Steve Hayes]

Man, I would go for the seven.

[Megan McCardle]

Yeah, I go for the bingo, man.

[Steve Hayes]

Bingo. So I'm just going to point out for historical sake, that movie came out, I believe, in 1998. This tax reform debate was in 1996. I don't think there's really any question that the Farrelly brothers built that scene around the Steve Forbes, Phil Graham competitive tax reform proposal bids in the 1996 Republican primary. So, Mike, there was at the day after Phil Graham made his announcement, by the way, Jack Kemps announced the results of his 1996 Tax Reform Commission. So we saw this a lot. We saw this, you know, More recently in 2016, there was the Herman Cain nine nine, nine, nine. We're just not having these debates anymore. It seems to me, as the code continues to get more and more complex, why is tax reform not a bigger part of our political discussion?

[Mike Warren]

Before I answer that question, I want to contend with your idea that Steve Forbes is not TV ready, because you may recall that after he dropped out of the presidential race, he actually hosted Saturday Night Live. And so disproving that. And furthermore, the musical guest on that episode was Rage against the Machine. And I just love that idea of Steve Forbes introducing Rage against the Machine, the most sort of lefty rock group that you could think of. So why aren't we having these debates anymore, Steve? Like, we talk about this all the time. We're not having any policy debates anymore. I mean, what are we really talking about that has any real significance? We debate Iran policy when we launch a war with Iraq. We debate tariffs when. Well, if Scott had his way, we would be debating tariffs all the time. But when we have a Liberation Day moment, we sort of move from moment to moment. And I think in a lot of ways, leave the Democratic Party aside for a second. The Republican Party, the ruling party in Washington right now, they move in the direction of wherever the president, wherever the leader's gesture of that moment is. And there is no sort of policy debate to be had because Donald Trump doesn't really have any sort of philosophical or ideological views about taxation. If anything, he is very much of that ilk that says, okay, who can come to me and I can give handouts to? Who can I help subsidize? Who can I punish that I don't like, or who angers me? So there's been, I would say, you know, in my 16 years in Washington, there has been such a degradation of the conversation that's going around in, you know, on Capitol Hill, in think tanks and even in media. Like, it feels like those of us in the media that try to write about this or talk about this or ask politicians about this feels like we're almost fighting a losing battle, even bringing these kinds of issues up, because at the end of the day, it seems like there's none of the institutional knowledge or interest in debating some of these issues. And the reason I asked Scott at the beginning about the Tax Cut and Jobs act, right, the TCJ, the 2017 Trump tax cuts, is because that really does feel like it was like the end of those debates. And I'm not saying that look, you know, everybody on this podcast thinks and writes and talks about these issues and a whole lot of other issues. But when it comes to elected officials, it's just not a part of the conversation. And it is a baffling question for me because I go out on the trail, I'm on the trail right now trying to cover some, some races and primaries. And when you ask, you know, folks who are running for office about policy questions, they almost are like taken aback, like, oh, hold on, wait, you're asking me about what? You're not asking me about what Trump said, you're not asking me about horse race stuff. True. And you could tell they're a little uncomfortable about it.

[Megan McCardle]

Yeah.

[Scott Lincecum]

You can actually see this, I think in the one big beautiful bill act, this tension because there were I think tax writers who actually wanted to have a good tax.

[Mike Warren]

That's fair.

[Scott Lincecum]

Right. And they wanted to just extend tcga, make full expensing permanent, that's the deduction for capital investments, that kind of stuff. And go along with it. But the issue is that you had Trump just previously promising no tax on tips, no tax on Social Security, no tax on. And so you. They had to deal with that stuff too. And I think one of the kind of clever things some of the tax writers, publican tax writers did was all of those gimmicks expire, or at least they're scheduled to expire. That's a whole other story if they actually will. And while the good stuff, the stuff they wanted is permanent. Right. So they're like, okay, just three years of this nonsense and permanent good stuff and we'll move on. But there's just this huge tension between the kind of Trump show and actual people who want to make policy in Washington. Right. And it's a brutal dynamic.

[Steve Hayes]

Yeah, it certainly is the case that there are people who are having these debates and people, I mean on the Hill, you know, well, meaning hard working policy, you know, on tax and tax reform. But beyond that as well, we are shorthand for them sometimes is to get done caucus. It's not sexy, but people have to do the, the basic work of government and there are good people doing it. We just don't have much of a public debate. I mean even the one big beautiful bill or the, the Tax Cuts and Jobs act, you know, there were debates about it and I don't mean to suggest otherwise, but in terms of getting, you know, having a sort of fully engaged continuing debate on the relative trade offs or the policy merits of these kinds of bills, we just don't have it the way that we used to. Well, as promised, I want to play a video that New York City Mayor Zoran Mamdani released on tax day. Happy tax day, he said. Released this on social media, and it fits perfectly with the kinds of things that we were saying. And I think Mamdani might not be the way I would have done it. Is seeking to engage this debate on sort of his progressive, populist, socialist terms. And there's no question he meant to provoke with this video.

[New York City Mayor Eric Adams]

When I ran for mayor, I said I was gonna tax the rich. Well, today we're taxing the rich. I'm thrilled to announce we've secured a pied a terre tax, the first in New York's history. This is an annual fee on luxury properties worth more than $5 million whose owners do not live full time in the city. Like for this penthouse, which hedge fund CEO Ken Griffin bought for $238 million. This pier to tear tax is specifically designed for the richest of the rich, those who store their wealth in New York City real estate, but who don't, actually. But even so, they're able to reap the huge financial rewards of owning property in, dare I say, the greatest city in the world. And most of the time, these units are sitting empty since, again, they don't actually live here. This is a fundamentally unfair system that hurts working New Yorkers. Now it's coming to an end. This tax will raise at least $500 million directly for the city. It'll help fund things like free childcare, cleaner streets, safer neighborhoods. As mayor, I believe everyone has a role to play in contributing to our city, and some a little bit more than others. Happy tax day, New York.

[Mike Warren]

I love the succession theme music that's playing underneath.

[Steve Hayes]

Is that what that was? Yeah.

[Mike Warren]

Yeah. It's a ripoff of the succession theme and really trying to play into that. The evil rich people on that show, remember them? Don't you want to tax them?

[Steve Hayes]

Yeah.

[Megan McCardle]

Indeed.

[Steve Hayes]

Yeah. Megan, I'll start with you on sort of the policy implications of this. Let's just say if you're an average New Yorker making an hourly wage, you voted for Mamdani. You wanted some reform. You like the idea of soaking the rich. Is this good from a policy perspective for that kind of a voter?

[Megan McCardle]

Complicated. Like, it's not. If you think that you're actually going to raise 500 million, then I guess there are worse ways to raise it. I mean, here's the thing. What you're going to do is crash the market for high end New York real estate. And people who have PA terrors are going to sell them and then that real estate will be worth less, which will lower your property tax collections. So that's great. And then you're not going to totally crash the market. But, you know, New York is also. And to the extent that New York is doing this, instead of raising the income tax on its highest earners, which was the alternative plan that they'd settled on, you know, it's better. But that said, the people who have payeters, I guess you could say they consume a scarce real estate unit that someone else could be in. And that is true. But they're not that many of these apartments. It's not like London where you have whole neighborhoods where like literally no one's there. And it's a little freaky. Not literally, but you walk through some parts of like Kensington and it would just feel weirdly empty at night because it didn't seem like anyone was actually residing in any of the houses. But those people, when they come, they consume a lot of services. They consume a lot of like retail and restaurants and all that stuff. What they don't consume is normal city services. Right. They don't ask you to educate their children. They don't use the roads that much. All of the expensive.

[Mike Warren]

They don't ride the bus.

[Megan McCardle]

They don't ride the bus. But they also don't like, generate a lot of trash. Right. All of the stuff you have to pay for as a city. So it's not clear that by chasing those people out, it's actually net fiscally beneficial, given that this is on the margin going to ease the real estate taxes you collect, lower them. And also to the extent that other people move in who are residents of New York, you get some income tax from them. On the other hand, I will say that a friend who is on the board of a New York City private school says those people are already leaving. Yeah, they just, they're, they don't trust Mamdani. And so that this private school, which is a like pretty prestigious private school, is basically, they're now having trouble filling their places for, especially for older kids. People are just decamping to the suburbs or to like, Florida in one case. You said, like one of their hedge fund people just left moving to Florida. And Kathy Hochul, by the way, who

[Mike Warren]

hilariously this is the governor of New York.

[Megan McCardle]

The governor in New York who has to sign off on this, right? Like Mamdani is claiming credit for this. The New York State legislature has to sign off and the governor on New York City raising its taxes. But, you know, five years ago, Hochul, I think it was 20, 21, she was saying, you know, don't let the doorknob hit you on the butt on the way out, you traitors. We don't need you. You're not. If you voted for, you know, like, Trump, if you're one of these, like, get the hell out of here, go to Florida. And then she has apparently realized that those people paid a lot of taxes and she needs them and was actually saying, like, you know, if you know any. If you go to Florida, you know, anyone who's moved there, tell them to move back.

[Steve Hayes]

Yeah.

[Megan McCardle]

And I think the PAA terror tax is basically an attempt to say, okay, well, we're not against people who live here because you guys generate a lot of income taxes for both the state and the city. It's just owning. It's. We're gonna do a new property tax on owning property in New York. But I think it's just generally the signals that Mamdani is sending is, I hate rich people and I'm gonna screw them.

[Mike Warren]

Yes.

[Megan McCardle]

And lately it's. You can argue that that's totally fair. Those rich people are parasites when they don't pay their fair share. I do not think that is an accurate account of what the New York City tax base and service base looks like. But leave that aside. If that's what you think like, those people are, a lot of them are just gonna be like, you know what? I don't need the hassle. New York's a great place. It's got a lot of amazing culture and so forth. There are a lot of places in the world with a lot of amazing culture and so forth, and they're just like, it would be much less of a pain in the butt to have real estate somewhere else. Stay in a. You know, stay in a hotel the few nights that I want to come to the city and just not have the hassle or downgrade my piederra to one. Like, another thing you're probably going to see. Ken Griffin can sell his fabulous mansion and buy, like, a nice little $5 billion apartment that he's not going to have to pay taxes on. And a $5 million apartment really is little in probably the fanciest areas of New York, but it's probably big enough to have a few people in for dinner when you want to do that and, like, do your entertaining in a restaurant. Do your. Like, it's. And so I think ultimately what this is going to do is crash the ultra high end of the New York City real estate market quite a bit, in part because it's happening at a time when remote work and telecoms and shifts in the global economy and so forth have just made it less essential to be in urban areas like Silicon Valley, like Seattle, like New York. These places have depended for decades on having a moat. Can't really move your highest earners out of New York. You need that like knowledge cluster. You still need it. It's less valuable than it was. It's easier to hop on a plane and like do it somewhere else, people. There are upcoming cities like Austin that are starting to become real tech hubs and so forth. And like New York has to really grapple with the fact that there is competition.

[Mike Warren]

But don't you think, Megan, and you're a native New Yorker.

[Megan McCardle]

I am, I grew up there.

[Mike Warren]

That this is such a sort of politically populist move here? Like there has always been this kind of, particularly in Manhattan, right. A kind of like, you know, the rich people are finally getting what a lot of regular New Yorkers have always kind of felt. They're finally, you know, having to do pay their fair share. This politically, this seems really savvy of Mamdani, irrespective of all of the problems that you have raised about what this might mean for revenue. You know, this is something that at least a segment of New York's population has wanted in some way. Maybe not in understanding the specifics of how it would happen and what it would look like, but a way to kind of just stick it to very wealthy class that has become in the last couple of decades ultra wealthy. And that wealth has been sort of even more imposing in ways that sort of trigger that the lizard part of your brain, as Jonah likes to say.

[Megan McCardle]

Yeah. So I think, is it politically savvy in the short term? Probably, yeah. Lots of things are politically savvy in the short term. It was politically savvy in the short term for New York city in the 60s to build up all sorts of running deficits and so forth. It then turned out to be not so politically savvy when the city almost went bankrupt in the 1970s. Documentary. There's a great documentary on this, by the way, called Drop Dead City that I highly recommend watching. It's I believe, on Netflix and it chronicles that my dad was actually a budget analyst in the city of New York during those years and was an assistant. He was a budget analyst under Lindsay and then he was an assistant to Abe Beam when all of this was going down and so had a front row seat to the disaster. And, you know, a thing that happened in the 60s was that new York, for a variety of reasons, and you can argue that it would have happened anyway, but New York kind of actively chased its manufacturing out and people within New York City politics were trying to stop that and saying, like, no, you can't just keep jacking up all the taxes and regulations and so forth on manufacturing without losing it. And people were just saying, well, A, we don't need them and B, they can't really leave. How are you going to leave the city in New York? It turned out like a lot of people could leave the city of New York.

[Mike Warren]

Sounds familiar.

[Megan McCardle]

Yeah. And I think that this is the thing. New York, One thing to remember is that this is actually quite new. You know, the rise of finance as the, I don't want to say loan. But now close to the lone anchor of the New York City economy. The culture industry is still there. It is struggling. It has not recovered from the pandemic. Tourism is constrained by the fact that the unions have made it. The city has done deals with the unions to both basically make it illegal to operate an Airbnb and constrain hotel construction.

[Mike Warren]

Cost of a hotel room in Manhattan is out of control.

[Megan McCardle]

The advertising industry is not what it once was. Television production has moved out of New York and la, which is very expensive, and to other places within the New York City area. There are some studios in New Jersey, but there's also for scripted shows more and more. Atlanta, Vancouver, et cetera, those businesses are still there. They still generate a lot of money. But like, linear TV is dying. Linear TV is what the industry calls basically your cable plus broadcast. That industry's dying. And New York doesn't have a lot of movie stuff to do, location shoots there. But what it has is a lot of television. And that industry is going to be gone in 10 or 15 years unless it figures out how to pivot to video, as we at the Dispatch are doing. And so ultimately they are really more dependent than ever on finance, which was one important, but not actually even that important aspect of New York. Wall street was one aspect of New York's economy in the 70s. It is now the overwhelming anchor in terms of revenue. And if that anchor goes away, it can't go away entirely. There's just a lot of reasons that it's kind of stuck there. But the more of it, the more the hedge funds move out, the more all of that stuff, the more you try to tax away all Those salaries and people move either to the suburbs or they just move somewhere else. Right. These people are more mobile than they used to be. The more New York's tax base is going to hurt. And that is what Hochul is kind of belatedly waking up to and what Democrats just kind of assumed couldn't happen. And that is. It can. It is happening.

[Scott Lincecum]

Yeah.

[Steve Hayes]

I mean, Mike, I agree with you on. On the Mamdani political move. I think he's. I think he is a genius politically. I mean, I think he's. The way that he's.

[Megan McCardle]

Yeah.

[Steve Hayes]

The way that he ran his campaign, the way that he injects himself into the bait. We're talking about him now, but we're talking about him for substantive, populist, progressive reasons. It's not just. He's not Eric Swalwell for all of the reasons that we think. Eric Swalwell isn't great, but he. He manages to do this and he sort of. He comes up with policy proposals that I think are mostly disastrous, mostly will be. Will have horrible results on New York City, on the economy in New York City. But it's almost like he's. It's like he's. There's a race, there's a competition. On the one hand, he's rolling out these proposals that I think are likely to do damage to New York City economy and lower his popularity as the damage becomes more and more obvious. But at the same time, he's growing his presence. He's becoming a nationally known Democratic Party spokesman. One of the things he rolled out this week, he ran on this controversial proposal of having city grocery stores, and he announced this week that they would be opening the first of these in 2029. So not right away. And the cost is likely to be $30 million. I don't know a lot about what it would cost to open a grocery store in New York City, but $30 million is quite a bit of money. Do you think he's backloading these proposals so that he can sort of up his. What do they used to call it,

[Mike Warren]

The Q, His Q score. Yeah.

[Steve Hayes]

You know, be more in the debate, drive the debate. And then these policies that he's proposing don't actually take place. They don't. They're not implemented until much later in his term or. Because he's a true. I mean, I think, you know, by most indications, he believes that the things that he's doing will help. Is this just a matter of, like, cutting through the red tape and figuring out how to set this thing up and that's going to take three years.

[Mike Warren]

A couple things. One, I think I agree with you about Mamdani's savvy. I think he is he smartly focused the first couple months of his administration on the kind of boring tasks that a mayor must worry about and, and did it in a way that was also engaging with the city and with the media on fixing potholes. Right. I think that was one of the videos that he's put out. So he didn't lead with the gazillionaire tax. He's only getting to that in April. But I do think that he is a part of a continuum within the Democratic Party. You can include Alexandria Ocasio Cortez, another New Yorker, and they all sort of are the children or grandchildren of Bernie Sanders, which sort of has on the left has taken policy seriously in the sense that they look at what their party has been standing for. Maybe they have sort of exaggerated or made up a few things that their party is standing for and saying we want something different and is engaging in essentially democratic socialist ideas for what government can do, what government ought to be doing, what the tax code should look like in order to pay for that. And I would say my observation on this is that there is no competition, not just within the Democratic Party, but within the political arena at large with this force within politics. I think there is nothing happening on the right. I think the right is sort of going to be caught looking at a world in which these policies are more popular than they think, certainly in the short term. And they're gonna be sort of trying to play catch up and relay, learn a lot of the lessons that Republicans had to learn kind of in the 60s and 70s as the new Deal sort of grew into the Great Society. And the excesses of that required, I think conservatives and right of center policy people to come up with better solutions. I think they're going to be Johnny's come lately on it because as what I said before, the policy is not what is motivating folks on the right. The center of the Democratic Party is a whole other story. But I think there is, this is like a long winded way of me saying I think there's a vacuum for policy. I think the Democratic socialists, as flawed as I believe that they are in this, are filling a part of that vacuum on their side. And everybody else in politics is to mix all my metaphors here is like whistling past the graveyard on this and they need to wake up.

[Steve Hayes]

Before we take an ad break, please consider becoming a member of the Dispatch you'll unlock access to bonus podcast episodes and all of our exclusive newsletters and articles. You can sign [e-mail] join and if you use the promo code roundtable, you'll get a month free. Speaking of ads, if they aren't your thing, you can upgrade to a premium membership. No ads, early access to all episodes, two free gift memberships to give away, exclusive town halls with the founders, and more. Okay. We'll be right back. Welcome back. Let's return to our discussion. Before we get to not worth your time, I want to ask you both if you have a story that you've read in the Dispatch over the past few days that you would recommend that our listeners go and check out. Mike and I'll start with you.

[Mike Warren]

David Drucker, our colleague, was on the road in Indiana looking at the retribution campaign that Donald Trump and his allies are making on the they're waging it on eight state senators who defied Trump's wishes to redraw the map, the congressional map, in the middle of the decade. It was an incredible stand that those state senators did which blocked that change to the map. Trump is claiming he's going to go after them. And I think anytime that we get out on the road and tell you what people are really thinking, what these state senators who made this move are saying and what their challengers are saying as well, I think is enriching. And I definitely recommend everybody go read it.

[Megan McCardle]

Megan, I'm gonna recommend a little bit of an oldie, but a goodie because I haven't gotten to talk since I read this. But it was the April 7 morning dispatch on private credit, so good that I had people on Wall street tell me that they thought it was really well done and unusually well done for media organizations that are often really struggling to talk about this subject intelligently. So if you happen to miss that one, if it doesn't, if that doesn't tickle a memory, I highly recommend that you go back to your Morning Dispatch email, which I'm sure you all get, and read religiously and reread that one because it really was a treat.

[Steve Hayes]

Yeah. And if you're not a member yet, the only way you'll be able to read the whole thing is by becoming a [e-mail] join. Yeah, that was really great one, Megan. And it was led by Alex Demas, who's one of our reporters, who has a history in those, in covering those things. So it very much showed. And I got the same kind of response that you did. So we will put that in the show notes. We'll put Drucker in the show notes along with some of the things we talked about earlier today. I'm actually going to recommend a Jonah piece, which pains me for reasons I think everybody can understand. But it was really good. And, and it's the decline and fall of Orbanism, looking at the loss of Viktor Orban in Hungary last weekend and the implications for Orban in Hungary, but also, and especially the implications for the new right here in the United States. Very, very smart look at those issues. Finally, for not worth your time, a little bit more of an on the news. This is more of a Sarah Isker not worth your time than a Steve Hayes not worth your time. Because I think one of her criteria early on was, you know, what are the youths buzzing about on the interwebs? There was a picture this week that surfaced on Twitter of the crowd at an event that Vice President J.D. vance attended in Georgia. And the event was sponsored by Talking Points usa Turning Point usa. What did I say? Talking.

[Scott Lincecum]

You said Talking Points USA Talking Points.

[Megan McCardle]

Although that is a great rebrand.

[Steve Hayes]

I mean, maybe, right. Turning Point usa. And I'm, I did not give either of the panelists a heads up that we were going to be talking about this. So I'm not sure that you've seen it, but if you've seen it, I'm usually somebody who doesn't. You know, this happens all the time in the last few weeks of a campaign, right. The opposing side goes and takes pictures of empty rooms and says, oh, this person has no momentum. This person is determined to lose or destined to lose. I don't usually pay attention to that, but I did think this was pretty notable. I mean, it was a huge space. It was maybe a third filled. If that these were free tickets that were provided. I'm interested in. Mike, if you've seen it, if you have, does this tell us anything? I mean, we know Republicans are down in the polls. Donald Trump's approval is very low. J.D. vance's approval is very low. Poll after poll shows an enthusiasm gap hurting Republicans. But you're in Georgia. This is an election year in Georgia. If ever you're going to show up to something like this, it would be sort of at a moment like this. No. How much should we read into a picture like that?

[Mike Warren]

So there's actually a lot going on in that picture. In terms of what could explain it, I think it's probably a combination of a lot of different things. One is something that I think actually deserves a little more reporting treatment, which is what's going on with Turning Point USA as an organization since the tragic assassination of Charlie Kirk, who was the founder and leader of that organization since his death last fall. I think the organization itself is going through a bit of an identity crisis and trying to figure out how it, you know, they have this big, famous charismatic leader who's now no longer there. And I think that has a lot to do with the organization as a whole. That might explain what's happening, at least in part. I think what you described is J.D. vance's low approval, particularly, and the Trump administration's low approval among young people, that it looked like maybe young people were sort of there was almost like, is this going to be Reagan 2.0 in the way that sort of young people were on the side of Ronald Reagan, particularly the 1984 election. And after the 2024 election, it seemed like the trend might be going that way. I don't think that's the case anymore. I think a big explanation might be, I'm here in Georgia. The weather is wonderful. I have been. I've spent four years on an SEC campus at this time of year in a neighboring state, but it's essentially the same kind of weather. It's a great day to be outside. It was a great day to be outside on that day, to sit, you know, and University of Georgia has some beautiful lawns to sit on. Who wants to sit in an arena and listen to. Not that popular vice president. There was the lieutenant governor who was running for governor. Burt Jones was also there. Not necessarily a huge draw for the kids. So, look, I think when it comes to kind of the opportunity cost or the other options that are out there for young people, going to see JD Vance in April is just not the draw that maybe it would have been in an actual presidential election. Here.

[Steve Hayes]

Yeah. Megan, how much should we read into the. This picture, this single image?

[Megan McCardle]

I think Mike makes many good points. Although it is like, if the weather is competing with you, that's not a great sign for your candidacy. I feel like.

[Steve Hayes]

Right. It would have been packed if it were storming.

[Mike Warren]

Yes. Okay, fair enough.

[Megan McCardle]

Senator Barack Obama would have filled that space right in, like, 2006. So I think, look, my baseline opinion of J.D. vance is that, look, I liked some of the iterations of JD Vance. The current iteration is not my favorite, but I always had some skepticism that he was gonna be president. I still think that his best path to the presidency is for Trump to die in office simply because it's not about whether you'd even be a good president. I think Hillary Clinton would have been a better president than Donald Trump, but she was a really bad politician. In America, the filter is. You gotta get past. It's not like a parliamentary system where you can just be on the list and it's your turn and you go, you gotta get past the public. And if the other party's brand is sufficiently damaged, George W. Bush, George H.W. bush, who I think was a wonderful president, can get past the filter. But in general, you gotta get past the filter. And JD Vance doesn't have it. Is what they call it in Hollywood where you get two equally good looking people and you put one of them on screen and they're amazing and you put the other one on screen and it's like, ah, he just doesn't resonate with the crowd. He's a really good debater. He skunked Tim Waltz and I think he's a good enough politician to get into the Senate maybe even without Trump's endorsement in a different year, we can argue about that, right? Like maybe that's not true.

[Mike Warren]

It took a lot to pull him over the edge.

[Megan McCardle]

I don't think MAGA JD Vance could have gotten into the Senate without Trump, but I think a completely different guy who was running on like his old Persona of empathetic right wing centrism, maybe, I don't know. But all of that aside to get the presidency is a whole different level of charisma and performance. And he doesn't have it. He's never going to have it. And I think that this is going to affect the race to be his successor because Trump likes people who are obsequious and he likes people who are craven. But he doesn't like losers. And he is, unless he dies in office, in which case all bets are off. Right. Although in that case also, I think JD Vance just ends up owning all of Trump's bad policy ideas and loses in 2028. But unless I think this has got to elevate Rubio, who is having a bit of a moment. Right. The Marco Rubio memes are the best thing about American politics right now. They're about the only thing political thing that Americans in a bipartisan way can kind of gently enjoy without destroying each other. He has been competent, you may disagree about a bunch of the stuff that the government has done, but he is execut competently and has executed without doing the J.D. vance attack dog, let's talk about the Haitians eating cats and dogs stuff. And so I think overall, you've got to think Rubio's now got a much better shot at getting the king's nod for the royal succession did a year ago.

[Steve Hayes]

Yeah, I mean, Vance, there's this angry edge to everything that Vance says and does these days. That was different than the hillbilly elegy J.D. vance, which was fundamentally sort of optimistic. And I think, you know, talk to people who know Vance and have known him for years, there are many different theories about why that is. One of them being that he understands what he had to do to get to where he is and he sort of continues to resent it to this day that he's had to make arguments, arguments that he didn't fundamentally believe in a way that I think Rubio has certainly changed his positions and his, his approach. You know, the industrial policy Marco is very different from the Marco that ran in 2016. In fact, when I was with Marco Rubio in the earliest days of the 2016 presidential race in both Iowa and New Hampshire, the topic that he led his stump speech with, I still have the audio from these was corporate tax reform. No longer making many of those arguments full circle, though. Yeah, as I say, I'm always a little dismissive attempt of, attempts to make too much of a crowd shot. But I think there are enough of these and it's supported by enough other data about the enthusiasm gap and some of the other things that I mentioned that this has to have Republicans pretty alarmed. I mean, the event, event that I went to cover in Florida, which was this road rally MAGA parade sponsored by some local Republican clubs, beautiful day. This was outside and you know, they had 50 people on a field that was more than an acre. And you know, the visuals were certainly bad. But I think the reality of it, if you're a Republican, it has to be alarming. With that, we're done. Thank you, you both for joining today. We are very excited to be launching Dispatch Markets and look forward to the contributions from you, Megan.

[Megan McCardle]

It will. I will be writing the next newsletter, so to, you know, get a subscription. Subscribe. It's going to be hot. Some awesome chart action, but I'm not spoiling it.

[Steve Hayes]

Who doesn't love hot chart action?

[Mike Warren]

Megan, don't, don't oversell it. Don't oversell, Megan.

[Steve Hayes]

We don't do that kind of cheap, click baity stuff, you know, come for the hot chart action.

[Megan McCardle]

I mean, these visuals, I'm telling you, sexy.

[Steve Hayes]

The conversion surges that we're going to see, data are amazing. Oh, sometimes it's a little too close to true. Thank you all for joining us and we will see you next time. Finally, if you like what we're doing here, you can rate, review and subscribe to the show on your podcast, Clear of Choice to help new listeners find us. And as always, if you've got questions, comments, concerns or corrections, you can email [e-mail] we read everything, even the ones from people who haven't seen There's Something About Mary that's going to do it for today's show. Thanks so much for tuning in and thank you to the folks behind the scenes who made this episode possible. Noah Hickey and Peter Bonaventure. Thanks again for listening. Please join us next time.

[Megan McCardle]

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